CANADA FX DEBT-C$ softens to 1-1/2 week low after Bank of Canada comments
* Canadian dollar at C$1.1024 or 90.71 U.S. cents * Bond prices mostly lower across the maturity curve * Bank of Canada holds interest rates steady * Bank notes risk of weak inflation By Solarina Ho TORONTO, April 16 (Reuters) - The Canadian dollar softened to its weakest level against the greenback in more than 1-1/2 weeks on Wednesday after the Bank of Canada extended its 3-1/2 year freeze on borrowing costs and noted the risk of weak inflation. The central bank's decision to keep its benchmark interest rate at 1 percent was expected, but the Canadian dollar reacted bearishly to the tone of the statement, even as Governor Stephen Poloz held firm on the bank's neutral stance. The Bank of Canada also said in its quarterly Monetary Policy Report that it sees a faster than expected rise in Canada's headline inflation, but suggested it would ignore the measure because it attributed it to temporary price increases in volatile items and a weaker Canadian dollar. "I think what you're seeing is the bank's plans and guidance at work," said Brad Schruder, a director of foreign exchange at BMO Capital Markets, adding that he did not see any surprises in Wednesday's central bank statements. "I think the momentum that had been previously supporting USD/CAD bulls has actually left them. This pop is actually a good opportunity to get long Canada." The Canadian dollar, which was underperforming against nearly all of its major currency counterparts, softened to C$1.1024 versus the greenback, or 90.71 U.S. cents, around midday, weaker than Tuesday's close of C$1.0977, or 91.10 U.S. cents. Earlier it fell as low as C$1.1034, or 90.63 U.S. cents, its weakest level since April 4. Schruder said he expects the USD/CAD to straddle the 91 U.S. cent level over the next quarter, and perhaps longer. Canadian government bond prices were mostly lower across the maturity curve, with the two-year off 1 Canadian cent to yield 1.182 percent and the benchmark 10-year off 10 Canadian cents to yield 2.399 percent. (Editing by Peter Galloway)
© Thomson Reuters 2016 All rights reserved.